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Pallet Industry Continues to Adjust to Change By Ed Brindley, Publisher Date Posted: 5/3/2004 The 2004 ALC was held on February 21-24 at the famous Hotel Del Coronado in
Ownership or Rental – Always an Issue For over a decade, pallet rental has been a hot topic anytime pallet people convene. This was particularly true at the 2003 ALC when CHEP rejoined the association and had a strong presence. CHEP Steve Mazza, president of S&B Pallet Co. in On February 18, Bruce Scholnick, president of the NWPCA, met with Steve and the Grocery Manufacturers of America (GMA) Logistics and Distribution Committee. They formed a joint task force to consider Steve’s white wood rental program. The Food Marketing Institute (FMI) will be asked to join the task force as well. Any overall program management will probably be handled by grocery industry associations if they agree to support this competitive alternative. Steve’s program revolves around the fact that the current whitewood exchange program allows food distributors to take ownership of emptied whitewood pallets to be either used as they deem appropriate or sold as cores to pallet recyclers. Neither the pallet recycler who supplied the pallet nor the grocery company that used it benefits directly from the value of the pallet once it is delivered under load. Thus, one of the current system’s benefits, the value of the pallet, does not appear as a direct financial credit to the grocery company that purchases it for use. Steve reaches an agreement with his grocery customer to lease him instead of sell him a whitewood GMA style pallet. Steve can lease this pallet at a lower price than he would expect to sell it because he will take possession of a like pallet at the grocery distribution center to which it is shipped. He can then sell the core to one of his network recyclers. A bill of lading tracks and authenticates leased pallets through to the distribution center. No attempt is made to mark and keep track of specific pallets. Instead the lease and retrieval is based on a ‘like kind’ concept. At this time, GMA is considering its endorsement of Steve’s program, and the NWPCA is expected to collaborate on administration. A third party provider, such as Timber Products Inspection, would help resolve disputes. The proposed GMA/NWPCA/FMI task group includes Steve Mazza, Sam McAdow, Pat Sherry, Steve Yelland, the GMA logistics and distribution committee, and the FMI. This new leasing concept offers flexibility. It is not restricted to used pallets, although most will initially probably be recycled. There is a growing interest in block pallets emerging in the grocery industry. This program has the flexibility to offer any style of pallet as long as it works out economically and logistically. Steve emphasized, "My system uses the recycling network as it exists today. It gets recyclers into supply chain management, out of the pallet buying and selling game." This new proposed system is strictly in its infancy. If nothing else, it shows the kind of ingenuity that exists in our industry. It will be interesting to watch any proposed rental alternatives as well as any systemic approach to organizing parts of the existing pallet industry infrastructure. The pallet rental versus ownership issue did not end here, however. Dr. Charles Ray, an assistant professor from Dr. Ray presented a preliminary sketch of the kinds of data he is attempting to collect and his anticipated analysis. As he said, "It should be the desire of the pallet industry to develop and implement the best unit load solution of its customers." Dr. Ray indicated that there are many, very real soft costs in unit load systems, but they are difficult to track and understand. Pallet users can track and tally hard costs pretty well, but they often do not understand the soft costs. His research is after an understanding of soft cost leverage points. He doesn’t expect to get a winner or loser kind of result. He hopes to have a methodology to understand soft costs and weights. He anticipates using graphic sensitivity analysis to examine the results of varying cost scenarios. When this research project is complete, he expects to publish a technical report with conclusions, recommendations and strategic implementations.
Sharpening Your Marketing Edge in Today’s Market of Change Dr. George Lucas of U.S. Learning, Inc., who was a hit at the Pallet Summit in New changing realities in today’s markets include smarter, more demanding customers, aggressive/panicked competitors, upward cost pressures, and modest growth. Customers have three choices: they can have it fast, or they can have high quality, or they can have it cheap. Dr. Lucas accentuated that a customer can have two of the three, but not all three. He said, "Until you have decided what you are not going to be, you cannot know what you are going to be. If you attempt to be everything to everyone, you end up being nothing to anyone." Dr. Lucas said, "There are three kinds of buyers: commodity (transitional) buyers, frustrated transactional buyers, and relationship buyers." Relationship buyers take a long time to successfully pursue. Frustrated transactional buyers are looking for a better way; they may confuse you but they can be the easiest to acquire because they are seeking something better than just price. (Display 1 presents several of Dr. Lucas’ quotes for your consideration.)
Economics Issues of Interest to Pallet People Just about everywhere you turn there is talk about the economy. The NWPCA meeting was no exception. Dr. David Huether, the chief economist for the National Association of Manufacturers, spoke on the future of manufacturing in the Dr. Huether believes that the economic stimulus in the economy is now solid enough that business investment and exports will climb this year, a very positive sign in the economy. When talking about some of the problems that are now embedded in our economy, he believes we have three long term concerns: 1) no pricing power, 2) the high cost of regulations, energy, health care costs, and taxes, and 3) a level international playing field. Between 1987 and 1994, the pricing power of manufacturers was similar to the overall economy. Since 1994, however, the manufacturing sector has been in deflation. Companies have simply not been able to move prices to cover cost increases. One major area of concern is costs such as regulations, energy, health care, and taxes. In the On the international trade scene, exports are up modestly, but imports have gone sharply higher. Trade has become very one sided. We are buying 29% of our imports from When addressing ways to improve
Lumber Supply Issues – Today and Tomorrow Don Haid, manager of raw materials and timber industry analysis for Weyerhaeuser Co., provided a very interesting perspective on lumber supplies. The North American timber zone is basically self-sufficient. The hardwood picture is not as rosy as softwoods. Between 2010 and 2020, hardwood inventories will peak and start declining. We could have long term supply problems unless some patterns change. More hardwood plantations, changes in demand, and environmental issues could have an impact. Non-American supplies are growing. Don spoke of a potential doubling of harvesting from A long period of wet weather in the South during 2002 and 2003 contributed heavily to hardwood supply shortages. Hardwood log exports have increased more than 50% in the last five years. The domestic furniture manufacturing industry has dramatically dropped since it started down in 1998-1999. Furniture imported from When summarizing some of his thoughts, Don said that timber is not the restraint in log supplies. Weather has certainly been a factor, particularly in hardwoods. He would not go out on the limb and forecast the future weather. Can you blame him? Housing is expected to slow some in 2005, but most do not expect its slippage to be too dramatic. Industrial production is expected to continue to strengthen.
Networking for the Betterment of All Ask anybody who attends NWPCA events why they go. The number one answer is almost always the same – NETWORKING. Our industry is badly fragmented; it always has been. One of the best opportunities for pallet people to pull together for a common cause and to learn from others is an NWPCA event. It is very difficult to network together and to learn valuable industry specific information from others unless you meet with other pallet people. NWPCA meeting events represent some of the best opportunities that exist. One of the most noteworthy organizational developments was the revised NWPCA officer election procedure. This year over a third of the membership voted (an improvement over past years) to select four new board members and one new associate representative. Pat Sherry of NEPA Pallet and Container Co. is the new board chairman, and Steve Geiges of Treen Box & Pallet became chair-elect. The board appears to be as strong as I can recall. See Display 3 for the total board composition. In addition to board meetings, numerous committee meetings provided opportunities for interested industry members to help guide the association’s directions and programs. Being actively involved in association affairs is certainly one of the best opportunities that a pallet person can have to expand intellectual horizons and influence the direction our industry takes. Pat Sherry, new board chair, shared the direction the NWPCA is taking to provide even better future meeting opportunities. The February ALC event will continue to be a deluxe meeting at a resort setting, but the association has been listening to the many comments about having more affordable meetings that require less time away from the business. A new series of regional seminars will present a no frills way of both learning and networking. These seminars will include a Friday evening networking reception, a series of Saturday morning workshops, a Saturday afternoon outing to fit the location and time of the year, and a Sunday morning series of educational sessions. The meetings will be over by Sunday The NWPCA plans to continue having its focused biennial recycling and Pallet Summit meetings. Future ALC meetings will feature educational tracks in three areas -manufacturing, recycling, and containers, as well as general sessions on topics of wide interest. Neal Grimes, chairman of the Pallet Foundation board, put an outstanding perspective on what the Pallet Foundation offers. Neal stated, "Have you ever said that you would like to do something to help our industry, to give back a little of what the industry has given you? It is actually an easy thing to do. Contribute to your own fund in the Pallet Foundation!" The Foundation, formed in 1996, stands on its own. It is managed by its own board, completely independent of the NWPCA. Many pallet people have together contributed hundreds of thousands of dollars to funds whose returns are used to fund industry educational, training, research, and marketing/safety projects. Readers can contact either Neal or me for additional details on this worthwhile opportunity. We all benefit from the projects that the Foundation funds, whether or not we are aware of it. Bill Biedenbach, outgoing board chairman, gave an overview of NWPCA accomplishments in 2003. He spoke proudly of three major achievements. First, the association started to work directly with OSHA to provide industry input so that OSHA can make more informed policies and decisions related to our industry. For example, many readers may not be aware that in 2003 OSHA targeted industries with high amputation rates. Guess who was very high on that list – the pallet industry. Initially OSHA has taken an interest in the bandsaw dismantling practices of our recycling industry. NWPCA is taking a proactive role to help OSHA make wise decisions in this important arena. Bill also applauded the new truly democratic voting contest practices for association leaders. Previously, members basically rubber stamped the slate proposed by the nominating committee. Now choices between competent and willing people can be made. Certainly the new choices for board members reflect a mixture of pallet manufacturers and recyclers that includes people who have a track record of leadership and responsibility. Lastly, Bill stated, "NWPCA leadership has fostered an atmosphere for conflict resolution." There is no doubt that our industry has had its share of conflicts the last few years, including several in the court system. The association has helped by providing an arena where people can discuss their concerns and differences. This may lead to a better resolution of some future conflicts. The association’s involvement ranges from a passive awareness by providing an avenue for discussion to a direct involvement to help mediate industrywide issues. Bruce Scholnick, NWPCA president, spoke on the unprecedented challenges we faced in 2003 and an overview of the coming 2004 year. Bruce’s list of challenges included the lumber shortage, decline in profit margins, movement of manufacturing customers off shore, burdensome regulations, and competition from within. The NWPCA is helping our industry face these challenges through such actions as working directly with OSHA, standing up for the wooden pallet industry with APHIS to prevent the elimination of wooden packaging in export shipments (the only organization to stand up for wooden packaging when environmental efforts attempted to eliminate wooden packaging by 2012), taking on the management of pallet fumigation programs, and launching a safety and health program under the direction of Adele Abrams. A new NWPCA web site and expanded program to reach out to interface with pallet using associations were among the 2003 accomplishments. Other NWPCA outreaches include being active in attending and helping to shape the World Pallet Council, which will meet again at Interpal 2005. This event will be sponsored by the Canadian Wood Pallet and Container Association in August, 2005, To make it easier to make solid contributions by serving on committees, and reduce the staff cost of such meetings, the association is planning one or more committee days in Any discussion of networking should include recognition of opportunities to interact with industry suppliers. In addition to the usual social events where networking abounds, this year’s ALC had numerous times set aside for breakfasts, lunches, and refreshment breaks in the exhibit hall. Certainly the NWPCA has never had an exhibit hall that was more attractive than the Crown Room, a Del Coronado landmark known for its beautiful wood paneling. This year’s "Deliver the Goods Auction" let attendees get a good deal from industry suppliers and support the Deliver the Goods trade promotion program. Items auctioned varied from copies of our reports (Pallet Profile and Recycling Record) to parts and supplies, nails, two weeks in From casual encounters in the halls to intense discussions over a meal, as always networking was high on the list of benefits attendees received. The benefits of networking have probably contributed to the reported NWPCA membership growth of over 30% in the last three years. Other topics were aggressively discussed in various concurrent sessions, giving this year’s NWPCA annual meeting a very solid program base. Outside the weather was not typical for
Display 1 • "If a customer says, ‘This is probably not of interest to you,’ listen carefully because he is telling you what he really wants." • "Clarify needs and then manage and subsequently exceed expectations." • "Don’t just persuade, educate." • "Understand your customer’s customers’ needs/requirements." • "There is little traffic on the extra mile." • "The number one source of information about your company and its products/services is your own people." • "Complaints are often opportunities." • "Do something different than what the masses do."
Display 2 • Consumer confidence is up 60% since April 2003. • Business activity is at a seven year high. • Corporate profits are higher, up 45% between Q2 and Q3 in 2003. • International conditions are starting to improve. • Business investments as well as exports are higher, up 14% from Q3 to Q4 in 2003, the best in 6 years.
Display 3 NWPCA Board of Directors Chairman — Patrick Sherry, NEPA Pallet and Container Co. Chair-Elect — Steve Geiges, Treen Box and Pallet Corp. Board Past Chair — Bill Biedenbach, Allegheny Recycled Products Secretary/Treasurer — David Eason, Pallet Resource, LLC President — Bruce Scholnick International Director — Jan Fredell, Fredells Associate’s Representative — John Lieber, Profile Technology, Inc. Director Emeritus — Bill Sardo Directors: Mike Doyle, The Pallet Factory Mark Garnett, Garnett Wood Products Co. Jamie Gilbert, Custom Pallet & Crating Bill Heussler, H&H Wood Products, Inc. Larry Konz, Konz Wood Products Sam McAdow, Sr., Buckeye Diamond Logistics, Inc. Jim Murphy, IFCO Systems of Tom Orr, WNC Pallet & Forest Products Co. Jim Ruder, L&R Pallet Service, Inc. Steve Yelland, Rohrbaugh & Company, Inc.
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